Avoiding the product development hamster wheel by adding the 4Cs to your R&D
April 22, 2021
Today’s technology companies are under enormous pressure to deliver the 30 to 40 percent growth expected by investors but they’re often hampered by emerging growth challenges. These include the “Tech Fail Zone”, growing sustainably, unmanaged technical and process debt, and “techlash”. In response, we identified four steps companies can take to overcome challenges and move to the next level of growth. Done correctly, these actions can help companies avoid the trap of hamster-wheel product development for continued success.
By Christian Kelly and Steve Roberts
<<< Start >>>
Move to the next level of growth: With Accenture's four steps your can overcome your challenges.
<<< End >>>
Hamster-wheel product development happens when companies get stuck in “feature factory” mode but are not able to create products that deliver real customer value. And in today’s ever-changing landscape, with its constantly evolving consumer demands, it’s getting tougher for technology companies to stay relevant. As Warren Buffet once observed, when the tide goes out you can see who’s been swimming naked. There are many examples in recent years of businesses that appeared to be on the cutting edge only for the tide to recede and reveal their lack of innovation.
A steep path
The path to growth for technology companies is getting steeper every day. And it’s becoming harder to build sustainable companies that keep both investors and the market happy. Bigger challenges like whole industry digitization, smart everything, income distribution, energy, healthcare, and the environment are quickly forcing tech companies to “innovate or die”.
Today’s tech giants face relentless pressure to deliver the 30 to 40 percent growth demanded by investors and the market. And with up to 60 to 70 percent of their stock price representing future value, these tech pioneers must keep delivering results, growing new multi-billion businesses, and disrupting markets at a breakneck pace.
<<< Start >>>
<<< End >>>
In addition, the market is wising up and has figured out the difference between innovation that drives real customer value and “feature factories”. These are companies that develop “cool” products that don’t actually offer very much in terms of value or innovation. But it’s not all bad news.
As our research notes, technology companies can take four steps to help adapt to this new era. By focusing on these, technology companies of all sizes can overcome the hurdles they face and avoid the trap of hamster-wheel product development. They can drive the R&D4C model, where C is a closed loop on the commercialization of company and customer value.
Four steps to success
1. Escape the “Tech Fail Zone”
This refers to technology business ideas and products that fail to make the leap from early adopters to mainstream adoption. Today, there are countless companies investing in foundational R&D that has little or no connection to the creation of customer value—over the years, billions have been invested in projects that generated very little revenue.
To escape the Tech Fail Zone, companies must cross the adoption gap by way of outcome-driven approaches. They should use the incubation period to understand customer needs, get customers to test their product, refine the product following feedback, and so on. Specifically, they should:
<<< Start >>>
- Find the right customer experiences that drive pull from customers.
- Define the provable value in those experiences.
- Repeat the process with enough customers to create a tipping point.
- Help customers to scale adoption and drive the necessary organizational change.
- Incubate the market with finance, partners, and client opportunities.
- Market this narrative across customer sets.
<<< End >>>
2. Mature the organization to maintain effectiveness
Developing a successful product is just the beginning—reaching sustained growth is where it gets hard. The positive qualities that help companies escape the high-tech fail zone are not the same as those needed to sustain the company to greater success.
The goal here is to sustain through multiple business models and enable each new business to operate with the minimum central principles and support needed. Operating across different growth zones requires different skill sets to best manage the requirements of each zone.
3. Pay down value debt before it puts you out of business
An accumulation of debt will create a drag on growth. Businesses have to be aware of where and how they’re building debt. Excessive debt significantly increases operational costs and greatly limits new revenue enablement.
Too often, the strategies for paying down different forms of debt actually increases the degree of indebtedness as companies tend to use the same approach as they did during their early years. Companies must evolve their thinking and understand that debt is an inevitable part and sign of growth. More important: they need to know when and how they’re going to pay it down.
<<< Start >>>
Businesses have to be aware of where and, how they’re building debt and critically, when and how they intend to pay it down.
<<< End >>>
4. Navigate the “techlash”
Most major tech companies today face public scrutiny of their role and position in society. The focus from journalists and commentators has shifted in just a few years from the source of tech companies’ success to identifying the ways they pose a mild to severe danger to society. The most common concerns are around monopolistic behavior, winner-takes-all mentalities, and the erosion of social values.
Technology companies need to be hypervigilant of how their business models are perceived and the potentially harmful externalities they create. To succeed, they must pave a new path of responsible innovation in partnerships with their broader stakeholder group, i.e. everyone. They must take a more sophisticated approach to the impact they have. And they must put mechanisms in place that enable them to monitor, assesses, and manage the various risks their global scale and reach generate.
How to guarantee growth
By taking the four steps outline above, technology companies can move to the next level of growth through innovation. Carefully analyzing the business will help companies to spot pitfalls and take the right actions to overcome them. To further drive success, we recommend companies implement the following initiatives:
<<< Start >>>
- Drive your entire organization to an R&D4C model, where C is a closed loop on the commercialization of company and customer value.
- Extract more 4C value by training the organization in business R&D. This will drive the process from incubation to commercialization.
- Introduce a cross-functional portfolio planning process that uses data-driven insights to define where money is best spent to fuel your growth engine, e.g. foundational R&D, go-to-market, or customer incubation.
- Establish an ongoing debt reduction program, fund it, empower it and measure its success. Remember, while debt isn’t necessarily a bad thing, unmanaged debt will kill your company.
- Segment your organization into different operating blueprints for incubation, growth/scale, and sustain. Incubate and grow like a venture capitalist firm—scale and sustain like a private equity firm.
<<< End >>>
About the authors
Christian Kelly and Steve Roberts
Christian is a Managing Director at Accenture Strategy. He knows what to do to make better product development decisions, define what products and services to create, and develop next-generation R&D practices for complex hardware-software-services combinations. Get in contact with him on LinkedIn.
Steve is a Managing Director in Accenture's Industry X practice. He is passionate about bringing innovation to product development, engineering & manufacturing for faster time to market and a higher return on R&D spend. Start a conversation with him on LinkedIn.
<<< Start >>>
